Cake Shop Takes Its Fundraising Campaign To The People

On a recent evening, Queens resident Linda Ann Jordan sat around a candlelit table with three of her friends at the Lower East Side coffee bar/venue/record store Cake Shop. The first show by her band, Good Sports, would take place downstairs later that evening. Gesturing to a friend across the table, she said, "We were just talking about how every band we've ever been in, its first show was at Cake Shop." A willingness to book unknown bands has always been a point of pride at the venue, but if things don't turn around for Cake Shop soon, Good Sports' gig could be one of the last first shows Cake Shop hosts.

Last week, Cake Shop was the latest to join the melancholy brotherhood of financially troubled venues. They put up a project page on the community-funding site PledgeMusic.com seeking an unspecified amount of money to cover nebulously-described " financial hurdles," including "one-time fines and legal fees." It's possible to read the entire project description, which maintains an upbeat outlook, and come away not exactly understanding what the big deal is. Is this even that serious of a situation? As it turns out, it is. "Without the support," says Nick Bodor, one of the venue's three co-owners, "Cake Shop is not going to be open in two months." Cake Shop owes money to various entitiesto the city, to its lawyers, and most of all, to its landlordand would need to make roughly 250% of its goal to pay off all of its debts. The goal has only been set so low so as to guarantee that cash can be withdrawn in the next 60 days.

SOTC spoke to Bodor over the phone this past weekend, and in a wide-ranging discussion, he outlined how a confluence of financial and legal problems, involving players from the Mayor's office to the venue's own lawyers, have come together to stick Cake Shop with a very hefty bill while making it much harder for them to pay it off.

Bodor has been operating coffee shops and bars (alt.coffee, The Library Bar) in the East Village since 1995. "Does that make me a Wharton MBA? No," Bodor says, describing his business model as "setting up places that I think should exist, and then working really hard to keep them open as long as I can." Which, while noble, can leave some holes in financial planning.

The problems with Cake Shop began six years ago, when the venue signed its original lease. It included a real estate tax abatement, an agreement that leads to reduced property taxes for a period of time. These abatements gradually expire, leading taxes to jump dramatically in a lease's final years. Cake Shop knew this bill was coming throughout their entire existence; the owners just didn't know how much it would be.

When the landlords (149-151 Essex Street Associates LLC) finally passed along Cake Shop's new tax bill in mid-2011, Bodor says, everyone at Cake Shop was shocked: The venue owed an eye-popping $33,000 on top of increased rent. While Cake Shop was negotiating a payment plan, the bill for the next year came in, and that added an additional $25,000. Through some negotiating, they were able to cap the entire sum at $55,000still a high figure for a venue like Cake Shop, which, as Bodor puts it, has "always operated on this very slim margin where we make a little bit of money and our salary, but we've never banked money and we don't have any kind of buffer or emergency fund." Currently, the venue is under a court-ordered payment plan where it has to pay $16,000 per month until its debts are paid. (The court also agreed to cap tax payments for the lease's seventh through 10th years at $25,000 per year.)

The above account is roughly confirmed by a source close to the landlord with knowledge both of this specific case and real estate laws generally, who requested anonymity because they are not authorized to speak publicly on the matter. The source confirms the payments as outlined abovehowever, the source disputes the amount of the tax increase, saying it is lower than Cake Shop claims. (The landlords themselves were not available to speak on the record by the time this piece was published.)

Bleached at Cake Shop, 2011

These problems have been compounded by the city government and police department. Like other outlets in New York, Cake Shop has had to deal with strict enforcement of health and safety codes under a joint initiative between the Mayor's office, the NYPD, and the State Liquor Authority, dubbed MARCH (Multi-Agency Response to Community Hotspots). As the Voice outlined last year, it was under the auspices of MARCH that numerous Brooklyn and Queens DiY venues were targeted and closed.

Bodor is at pains to explain that he and Cake Shop are "very pro-police." Still, he's no more animated at any point in our discussion than when going over the various hassles he's had to deal with under MARCH. The venue has been cited for everything from noise complaints (dismissed) to failure to possess a public assembly permit (it doesn't need one), and even something as small as having candles (which, it turns out, it is allowed to have). "We got, like, 16 tickets, and 14 of them were thrown out," Bodor said. "And you know, every time we go to court we have to bring an attorney with us, so there's all these legal fees." Add to that total an outside security guard, which local police "strongly suggested" Cake Shop hire at an annual cost just north of $57,000, despite its "mellow crowd" and extremely rare history of fights (Bodor claims that the venue has had only one in six years).

Especially onerous for Cake Shop are changes in the forms of ID it can accept. Every patron and every member of every band under 40 must have valid, non-expired ID in order to enter. Even worse, Cake Shop is no longer allowed to accept foreign drivers' licenses. "It's so hard for the staff," says Bodor, "because it's a new situation [the police] are not explaining to the public, and we have to be the bad guys and not let [anyone without valid ID] in, even though they've been using their ID all over the city, or if they've been using it for three years."

Facing all of this, Cake Shop desperately needed more money, and needed it fast. The possibility of finding an equity partner to buy a share in the business was raised. "The problem is," Bodor says, "that if we could get evicted at any second, no one's going to invest in us." Cake Shop considered taking out a traditional loan, but was unable to secure one due to the tight credit market. Appealing directly to the people was the most viable option.

Cake Shop is hardly the first venue to turn to community financing. Silent Barn, facing eviction in 2011, raised more than $40,000, which it has been using to help find a new permanent home. Bodor sees the benefits of this kind of fundingwhich he looks at as a sort of updated version of classical patronage, where the wealthy supported artists in return for small benefitsas purely practical. "The reason I think we've seen a rise in crowdfunding is that nobody can borrow," says Bodor. "I mean, it's ridiculous that I would lose a business because I can't even get my hands on $10,000." There's also, of course, the fact that you don't have to pay the money back.

Bodor is upbeat about the chances for Cake Shop's future, with plans to expand its brand into a media company or record label. Still, he says, "We need to preserve the brick and mortar. We need to basically not get evicted."